Interest payable to Dassault is not taxable in India under Article 12.3(b) of the India-France Double Taxation Avoidance Convention – AAR

Re Poonawalla Aviation Private Limited (AAR) – Clause 7 speaks of India limiting its taxation at source on interest dealt with in Article 12 of the Convention by providing a lower rate or by providing a scope more restricted than the rate or scope provided for in the Convention, the same rate or scope shall also apply to the Convention in question. A question of lowering of rates is not involved here. What is contended is that the scope of taxation of interest has been further restricted by taking out of the purview of taxation, even loans or credits insured by Banque Francaise du Commerce Exteriur or COFACE. Going strictly by the other treaties relied on the restriction is only on taxing the interest income insured by Banque Francaise. No entity similar to COFACE is referred to in the treaties with Canada, Hungary and Ireland. It is seen that COFACE is a body incorporated under the laws of France, acting on behalf of the French State in the export credit insurance. It appears, therefore, to be a body created for extending insurance on behalf of the French State, somewhat akin to Export Import Bank of India.

BEFORE THE AUTHORITY FOR ADVANCE RULINGS
(INCOME TAX), NEW DELHI

5th December, 2011
PRESENT

Mr Justice P.K. Balasubramanyan (Chairman) Mr. V.K. Shridhar (Member)

A.A.R. No. 953 of 2010

Name & address of the applicant            :           Poonawalla Aviation Private Limited,

Commissioner Concerned                       :           Commissioner of Income-tax-II, Pune
R U L I N G